Tax farms as farms, not houselots

Rhode Island needs to help preserve the family farm

Op-ed by State Representatives Larry Valencia and Donna Walsh

Part of what makes South County special is that despite the pressures of modern society, we have not only managed to hold on to our agricultural heritage, but have even expanded on it.

Preserving South County agriculture, particularly our family farms, is not simply an exercise in nostalgic sentimentality but a practical boost to our local economy.

Each of Rhode Island’s 1220 farms is a small business that create jobs and boost economic activity. With $170.7 million in direct sales another $97.5 million in indirect financial activity, our farms are important economic engines.

In South County, we have around 400 farms on 25,000 acres that sell $30 million in product each year. Our local farms tend to be larger at an average of 69 acres than the average sized farm in the rest of the state.

Of course, agriculture also contributes to our quality of life. Well-run, sustainable farming provides significant environmental benefit and nothing beats locally grown food for flavor and nutrition.

Farmlands enhance the beauty of the land, protect natural resources and provide habitat for wildlife.

In a state with the size and demographics of Rhode Island, maintaining, if not expanding, our agricultural base is challenging. Though the national recession and real estate market’s crash has somewhat curbed the sprawl that has devoured thousands of acres of farmland, there are still pressures on today’s family farms.

One of those pressures is a self-inflicted state tax policy that pushes family farms out of business. When the owner and head of a farm household dies, under Rhode Island’s estate tax laws, the farm is assessed not as farmland, but as if it was land to be developed as residential or commercial property.

The average sized Rhode Island farm is 50 acres. When assessed as a farm, it comes in under $869,000. But under current law, the estate value of that farm, appraised as if it was going to be developed, is $5 million dollars. The heirs then find themselves needing to pay an estate tax bill of $400,000, and that often forces them to sell off all or part of the farm just to pay the tax bill.

As Rhode Island Farm Bureau Director Al Bettencourt put it, “If we continue to tax farmland as house lots, they will become house lots.”

That’s why we sponsored House bill 7969 which would change Rhode Island’s tax law so that the estate tax on farmland is based on its actual use, not its potential use.

While H 7969 will mean the state foregoes collecting some tax revenue, keeping farmland as farmland is actually a very cost-effective approach. Farms only require about forty cents in public services for every dollar in taxes that they pay. By contrast, house lots cost $1.25 in city and town services for every dollar in taxes they generate.

Working farms pay their way.

This one change to the state tax law could keep thousands of acres of farmland in production for the benefit of us all.